Under Philippine civil law, contracts can become defective in various ways, potentially invalidating them or limiting their enforceability. Defective contracts are addressed in Book IV, Title II, Chapter 7 of the Civil Code of the Philippines. A contract's defectiveness can arise due to issues with its validity, consent, object, cause, or form. Defective contracts are primarily categorized as (1) Rescissible Contracts, (2) Voidable Contracts, (3) Unenforceable Contracts, and (4) Void or Inexistent Contracts. Each type has distinct features, grounds, and effects, which are as follows:

1. Rescissible Contracts

Rescissible contracts are initially valid and binding, but they may be rescinded, or canceled, due to certain external factors that prejudice the rights of a party or a third person. Articles 1380–1389 of the Civil Code govern these contracts.

Grounds for Rescission

A contract may be rescinded on the following grounds:

Contracts entered into by guardians where the ward suffers a lesion (injury) exceeding one-fourth of the value of the objects in the contract (Art. 1381).
Contracts by representatives in cases where the person represented suffers a lesion exceeding one-fourth of the value (Art. 1381).
Contracts made in fraud of creditors when the latter cannot otherwise collect the claims (Art. 1381).
Contracts concerning things under litigation that are entered into without court approval (Art. 1381).
Other cases specifically provided by law (Art. 1381).

Effects and Conditions of Rescission

Rescission does not apply to cases where the party seeking rescission has no other legal remedy to protect their interest (Art. 1383).
The action for rescission must be brought within four years (Art. 1389).
Rescission is limited to the extent of the damage caused, making it a partial relief (Art. 1384).

2. Voidable Contracts

Voidable contracts are valid until they are annulled. These contracts contain vitiated consent, meaning the consent of one of the parties was affected by mistake, violence, intimidation, undue influence, or fraud (Articles 1390–1402).

Grounds for Annulment

A contract is voidable if:

One party was incapacitated to give consent (e.g., minor or mentally incapacitated) (Art. 1390).
Consent was vitiated by mistake, violence, intimidation, undue influence, or fraud (Art. 1390).

Effects and Conditions for Annulment

A voidable contract is binding until annulled by a court.
The action to annul based on incapacity or vitiated consent must be filed within four years (Art. 1391).
If annulled, parties must return what they have received under the contract (Art. 1398).
Ratification can validate a voidable contract, extinguishing the grounds for annulment (Art. 1392–1396).

3. Unenforceable Contracts

Unenforceable contracts are agreements that cannot be enforced by action in court unless they are ratified. These are covered under Articles 1403–1408.

Types of Unenforceable Contracts

Contracts entered into without authority or exceeding the authority of the agent.
Contracts that do not comply with the Statute of Frauds (Art. 1403).
Contracts where both parties are incapable of giving consent (Art. 1403).

Effects and Ratification of Unenforceable Contracts

They are unenforceable in court unless ratified.
Ratification makes the contract enforceable (Art. 1405).
In pari delicto rule applies, meaning neither party can sue the other if both are at fault (Art. 1406).

4. Void or Inexistent Contracts

Void contracts have no effect from the beginning and cannot be ratified. Articles 1409–1422 discuss void contracts.

Grounds for Void Contracts

A contract is void if it:

Lacks an essential requisite (e.g., consent, object, or cause) (Art. 1318).
Is contrary to law, morals, good customs, public order, or public policy (Art. 1409).
Is simulated, meaning the parties do not intend the contract to be legally binding (Art. 1345–1346).
Involves impossible or unlawful objects (Art. 1409).
Is expressly prohibited or declared void by law (Art. 1409).

Effects of Void Contracts

A void contract produces no legal effect (Art. 1409).
Parties to a void contract cannot compel performance or seek damages.
If the contract involves illegal cause or object, and both parties are at fault (in pari delicto), neither party can recover what they have given under the contract (Art. 1411).
Exceptions exist where public interest is involved, allowing innocent parties to recover under certain circumstances (Art. 1412).

Special Rules for Void Contracts Involving Immoral Considerations

Contracts involving acts against public policy or that encourage illegal activities are void.
Recovery is permitted under certain exceptions, such as when public interest or the innocent party is at risk (Art. 1414–1422).

Summary and Practical Implications

In practice, understanding the classification of a defective contract is crucial as it affects how one may contest or enforce the contract. Key differences between these defective contracts are based on their validity, the possibility of ratification, the need for annulment or rescission, and the enforceability of obligations arising from the agreement.